Arguing the Wartime Suspension of Limitations Act does not apply to civil qui tam claims brought under the False Claims Act
Note: In what we believe is a NELF first, during the hearing of this case on January 13, 2015, Supreme Court Associate Justice Sotomayor specifically referred to NELF’s amicus brief, when she asked the attorney for the Petitioner whether he was “adopting the argument of the New England [Legal] Foundation, the amic[us] brief?” Counsel indicated that this was the case.
In this case the Supreme Court considered whether the Wartime Suspension of Limitations Act, 18 U.S.C. § 3287 (“Suspension Act”), a criminal code provision of the federal False Claims Act (“FCA”), that suspends, during and for five years after times of armed conflict, the statute of limitations for “offenses involving [contractor] fraud . . . against the United States,” also applied to civil qui tam actions brought under the FCA. The FCA, first enacted during the Civil War, provides both criminal and civil remedies against federal government contractor fraud. On the civil side, the FCA encourages private whistleblowers (“relators”) to bring suit on behalf of the Government (“qui tam” actions); if successful, a civil qui tam plaintiff is awarded a share of the government’s damage award (between 15% and 30%). Such civil qui tam claims under the FCA are subject to a six-year limitations period. 31 U.S.C. § 3731(b)(1). The Fourth Circuit in this case concluded that the Suspension Act applies to both criminal and civil claims of contractor fraud against the Government. Consequently, the lower court allowed the plaintiff-relator’s otherwise untimely qui tam FCA claim to proceed on the merits against defendants Halliburton Company, KBR, Inc., Kellogg Brown & Root Services, Inc., and Service Employees International, Inc. (collectively “KBR”).
Since the vast majority of claims under the FCA are brought as civil claims initiated by qui tam plaintiffs, the Fourth Circuit’s extension of the Suspension Act to civil as well as criminal cases under the FCA would likely have had enormous consequences for companies doing business with the federal government if it had been upheld by the Supreme Court.
NELF submitted an amicus brief in support of KBR, arguing that the Fourth Circuit had erred and showing, based on an extensive analysis of the Suspension Act’s legislative history, the source of its mistake. The lower court had misunderstood a crucial part of the Suspension Act’s statutory history. Prior versions of the Suspension Act, enacted in 1921 and 1942, had applied to offenses that were “now indictable under existing statutes.” I.e.,i.e, their coverage was retrospective only, applying to crimes, still timely, that had already occurred when those 1921 and 1942 statutes took effect. In 1944, however, Congress, made the Suspension Act prospective as well, by deleting the phrase “now indictable under existing statutes.” However, the Fourth Circuit, along with virtually every other court and commentator, misinterpreted this 1944 amendment. In particular, the lower court concluded that Congress’ removal of the phrase “now indictable” in 1944 expanded the meaning of the word “offenses” to include non-indictable, civil claims. NELF demonstrated compellingly that, to the contrary, when Congress removed the phrase “now indictable” in 1944, it simply extended the Suspension Act to future offenses of contractor fraud. (Congress also preserved other language in the 1944 Suspension Act to make it clear that the 1944 statute applied to past timely offenses as well.) By no means did the 1944 amendment affect in any way the exclusively criminal meaning of the word “offense.”
In its unanimous decision issued on May 26, 2015, the Supreme Court agreed with NELF’s arguments in the case. In an opinion that largely parallels NELF’s brief, the Court held that the Act only applies to criminal offenses under the FCA.
Arguing That the First Amendment Should Prohibit Massachusetts from Criminalizing Knowingly False Political Campaign Speech
At issue was whether Mass. G. L. c. 56, § 42, a 1946 statute that criminalizes any knowingly false statement in relation to any candidate for nomination or election to public office, violated the First Amendment to the United States Constitution. The statute punishes the convicted speaker with either a fine of up to $1,000 or imprisonment for up to six months. This case was initiated during the 2014 state elections by an incumbent (and subsequently reelected) candidate, State Representative Brian Mannal, who successfully applied for the issuance of a criminal complaint against Melissa Lucas, the chairperson and treasurer of Jobs First, an independent-expenditure Political Action Committee. Mannal alleged that Lucas was responsible for the PAC’s publication and circulation of a brochure falsely stating that Mannal, a criminal defense attorney, would benefit personally from the passage of bill that he was sponsoring. Mannal’s proposed legislation would earmark state funds for court-appointed criminal attorneys representing indigent convicted sex offenders in post-conviction proceedings. The SJC stayed Lucas’ arraignment in Falmouth District Court until it decided the constitutionality of the statute, in the exercise of its general superintendence powers. The Court issued an amicus announcement and heard oral argument on May 7, 2015.
In its amicus brief in support of the defendant, NELF argued that this case was not about protecting the right to lie in political campaigns. Instead, it was about protecting the First Amendment right of everyone, including State Representative Brian Mannal himself, to engage freely in political debate about the qualifications of candidates for public office, without fear of criminal reprisal from the government. Such speech is “integral to the operation of the system of government established by our Constitution. The First Amendment affords the broadest protection to such political expression . . . .” McIntyre v. Ohio Elections Comm'n, 514 U.S. 334, 346 (1995) (citations and internal quotation marks omitted).
As NELF argued, political speech does not lose its First Amendment protection even if it is false (to the extent that political speech can be reduced to truth or falsity). This means that the disputed statute is a content-based prohibition on protected speech. Therefore, the statute violates the First Amendment unless the Commonwealth can show that it survives “exacting scrutiny.” It must be narrowly tailored to serve an overriding state interest.
This the Commonwealth cannot show. Indeed, “it might be maintained that political speech simply cannot be banned or restricted as a categorical matter . . . .” Citizens United v. Fed. Election Comm’n, 558 U.S. 310, 340 (2010). This is because political campaign speech is the essence of self-government and thus occupies the highest rung of First Amendment values. To ensure the proper functioning of a representative democracy, core political speech must be afforded ample breathing space to flourish. The First Amendment thus requires that the electorate shall engage freely in political debate and shall decide whom and what to believe during an election campaign, without any governmental interference.
By contrast, the fact or threat of criminal prosecution is antithetical to this First Amendment value because it stifles political discourse, especially when that discourse is needed most, on the eve of an election. The statute thus impinges the rights of the electorate, both as speaker and listener. As a result, the political process suffers.
The First Amendment ensures a wide-open marketplace of ideas in which the appropriate remedy for allegedly false speech is simply more speech, and not enforced silence through actual or threatened criminal prosecution. As the Supreme Court has long recognized, counter speech is a particularly effective remedy during a political campaign, because a candidate is likely to respond immediately and forcefully to false accusations, as this case illustrates.
Not only does the statute fail exacting scrutiny. It is also void for vagueness. Political speech is often an unruly mixture of fact and opinion that cannot be reduced to neat categories of truth and falsity. This means that the statute cannot provide adequate notice of what speech is permitted or proscribed. This can only result in widespread self-censorship among the electorate. The statute’s vagueness could also invite prosecutorial abuse, such as the silencing of views that are critical of incumbents or government generally.
In its decision issued on August 6, 2015, the Supreme Judicial Court agreed with NELF that Mass. G. L. c. 56, § 42 was unconstitutional. The Court, however, based its decision entirely on the Massachusetts constitution holding that “§ 42 is antagonistic to the fundamental right of free speech enshrined in art. 16 of our Declaration of Rights and, therefore, is invalid.” On this basis, the Court dismissed the criminal complaint charging the defendant with criminal charges under § 42.
Whether an Agreement to Submit Valuation of Stock to the Binding Decision of Arbitrators is an Arbitration Agreement Enforceable Under the Massachusetts Arbitration Act
At issue in this case, pending before the Massachusetts Supreme Judicial Court (“SJC”), is whether a stock valuation provision in the articles of organization of a closely held Massachusetts corporation is enforceable under the Massachusetts Arbitration Act, G. L. c. 251, §§ 1-18 (“MAA”). The SJC requested amicus briefing on this issue. Under this familiar contract provision, the shareholders have agreed in advance to submit any future dispute about the value of a departing shareholder’s stock to a binding and final determination by an arbitral panel. Unlike the common law, the MAA provides for expedited specific performance of an arbitration agreement, via a motion to compel arbitration, along with other streamlined statutory mechanisms designed to enforce the parties’ bargained-for expectations.
The departing shareholder in this case has refused to complete the parties’ agreed-upon process for arbitrating the value of his shares. Instead, he has sought an accounting in court, as part of his claim for breach of fiduciary duty against the defendant, New England Cleaning Services, Inc. (“NECS”). The Superior Court denied NECS’ motion to compel arbitration, concluding that the parties’ valuation agreement was not an arbitration agreement. The lower court based its decision on Palmer v. Clark, 106 Mass. 373 (1871), and its progeny. In Palmer, decided nearly a century before the MAA’s enactment in 1960, this Court drew a distinction between an appraisal and an arbitration agreement. The SJC has also requested amicus briefing on whether Palmer and its progeny survive the MAA.
In its amicus brief supporting NECS, NELF has argued that the parties’ valuation agreement is indeed an arbitration agreement enforceable under the MAA, which applies broadly to any “controversy” that the parties have designated in their agreement for resolution in binding arbitration. In fact, this Court has already enforced a property valuation agreement under the MAA. See Trustees of Boston & Maine Corp. v. Massachusetts Bay Transp. Auth., 363 Mass. 386 (1973) (enforcing railroad right-of-way valuation agreement under MAA). As the Court recognized implicitly in Trustees of Boston & Maine, the MAA allows the parties to decide in advance both what is to be arbitrated--however specific and factual the issue--and how it is to be arbitrated--however informal the procedures. See G. L. c. 251, § 1 (MAA applies to “any controversy thereafter arising . . . .“), § 5 (MAA requires certain arbitral procedures “[u]nless otherwise provided by the agreement . . . .”) (emphasis added). In short, the MAA embodies the modern notion of party autonomy in the crafting of arbitration agreements tailored to each particular dispute. Therefore, the parties’ valuation agreement should be specifically enforced under the MAA. As a result, the old distinction between an appraisal and an arbitration agreement under Palmer should not survive the MAA. That distinction was drawn under a predecessor arbitration statute that did not apply to valuation agreements. Moreover, Palmer was decided when predispute arbitration agreements were voidable. Thus, in its day, Palmer actually protected the rights of shareholders to an appraisal agreement. Such protection is no longer necessary now that such an agreement can be enforced under the MAA.
On May 22, 2015, the Supreme Judicial Court issued its opinion in this case. Agreeing with NELF, the Court concluded that Article 5 of NECS's articles of incorporation contained a valid agreement to arbitrate future controversies regarding the value of NECS's stock. However, the Court also concluded that no such controversy existed at the time of NECS's motion to compel arbitration and, therefore, affirmed the order denying the NECS's motion to compel arbitration.
Defending the Immunity from Suit, under the Workers Compensation Act, of an Insured Alternate Employer
This case raised an important issue of first impression under Massachusetts workers compensation law. The plaintiff worked for a temporary staffing agency (his general employer) and was sent out on a job assignment to the defendant (his special, or alternate, employer). He was injured on the first day of the assignment, while performing a task under the direct control of the defendant on the latter’s premises. Later, after collecting workers compensation benefits, he sued the defendant on the theory that the company had not been his employer under workers compensation law and so did not enjoy an employer’s statutory immunity from suit. The trial judge granted the defendant summary judgment, and the plaintiff appealed. He argued that the defendant could not be regarded as his employer because the benefits he received were paid on the temp agency’s workers compensation policy.
As NELF noted in its brief, filed with co-amicus Associated Industries of Massachusetts, the defendant was named as an additional insured on an “Alternate Employer Endorsement” attached to the temp agency’s policy. As NELF successfully argued several years ago in another legal context, the effect of being named as an additional insured on a policy is to create a direct relationship between the insurer and the additional insured for the latter’s own liabilities, without regard to which party paid the premium for the additional coverage or who was identified as the named insured on the policy. Of crucial importance in this connection is the fact that the workers compensation act specifically permits a special employer, like the defendant, to agree with the general employer that it, not the general employer, will be liable for workers compensation, provided that the special employer is insured. The “Alternate Employer Endorsement” reflects precisely such an agreement and provides precisely such insured status to the defendant. In fact, as NELF pointed out, this particular endorsement form has been approved by the Massachusetts Division of Insurance for use in such situations, a fact of which both parties in the case were unaware.
NELF further showed that such endorsements are used nationally for this purpose, typically in the exact same standardized form found here (the form is promulgated by the National Council of Compensation Insurers). NELF called the Appeals Court’s attention to the use of the form in other states (New York, North Carolina, Texas, Delaware, Minnesota), where the form is officially approved and sometimes even prescribed for this use. Molina’s contentions that the use of the endorsement amounted to “an illusory promise” and a nefarious “artifice” were therefore without merit. In short, NELF concluded that State Garden was clearly the relevant insured employer for purposes of the work-related injury Molina suffered and that the company was therefore entitled to employer immunity from suit.
In its decision issued on September 3, 2015, the Massachusetts Appeals Court agreed with NELF that, under the endorsement, the plaintiff’s special employer was immune from suit under the Workers Compensation Act.
On September 23, 2015, Molina applied for further appellate review by the Supreme Judicial Court. This application remains pending.
Arguing that, Without an Express Legislative Mandate, the Massachusetts Department of Transportation Does Not Have the Authority to Regulate Outdoor Advertising Throughout the Commonwealth.
This case is before the Massachusetts Supreme Judicial Court on a certified question from the United States District Court for the District of Massachusetts. The question is whether the Massachusetts Legislature has authorized the Massachusetts Department of Transportation (“MassDOT”) to regulate all “off-premise” outdoor advertising (billboards, outside signs, and the like) throughout the Commonwealth. The SJC issued an amicus call on the question and NELF filed an amicus brief in support of Outfront Media, arguing that the MassDOT had acted without legislative authorization when it promulgated regulations purporting to regulate all off-premise outdoor advertising in the Commonwealth.
The issue was of importance to NELF and its supporters because outdoor advertising companies have long been subject to detailed and demanding local regulation by towns and cities throughout the state, and do not need to be burdened with duplicative and costly regulations at the state level.
In its brief, NELF argued that when the Massachusetts Legislature created MassDOT in 2009 in an omnibus Transportation Act, that same Act abolished the Outdoor Advertising Board, a state agency that for several decades had regulated the placement and manner of outdoor advertising in Massachusetts. Notably, the 2009 Act did not re-delegate the former Outdoor Advertising Agency’s regulatory powers to the MassDOT. By contrast, NELF argued that the Legislature, in the past, had indeed re-delegated the rulemaking authority of a predecessor outdoor advertising agency to its successor state agency, by so amending the relevant provisions of the enabling statutes. Therefore, the Legislature’s failure to do so in 2009 can only be a deliberate choice to remove the state from regulating all outdoor advertisements throughout the Commonwealth. Moreover, the Legislature has for nearly 100 years authorized cities and towns to regulate outdoor advertising. And both the Legislature and and the SJC have recognized that the regulation of outdoor advertising is primarily a local issue, because only local governments can respond to the particular aesthetic concerns and geographical details of each neighborhood.
To reinforce this point, NELF provided an extensive analysis and summary of the ordinances and bylaws of several cities and towns throughout the Commonwealth. NELF demonstrated persuasively that several cities and towns have done far more than the disputed state regulations to restrict the size, placement, and manner of outdoor advertising. Therefore, state regulation of the same issue is unnecessary.
After filing its brief, NELF received word that the case had settled, leaving the legal issue unresolved.
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